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The Ontario Securities Commission (OSC) has followed through on its recent pledge to ban the deferred sales charge (DSC) mutual fund structure.

The OSC formally adopted rule changes today that will eliminate DSC funds on the same time line as the rest of the Canadian Securities Administrators (CSA), effective June 1, 2022.

Last month, the OSC announced that instead of adopting a series of restrictions on the use of DSCs that would have preserved the structure, as it initially planned, it would instead adopt an outright ban — aligning its approach with the rest of Canada’s regulators.

The change of heart followed a consultation on the proposed restrictions, “which overwhelmingly expressed support for a harmonized Canada-wide ban on the DSC option,” the OSC said in a notice outlining the rule changes.

The revisions to the mutual fund rules announced today, “prohibit the payment by fund organizations of upfront sales commissions to dealers, which will result in the discontinuation of all forms of the deferred sales charge option,” the notice said.

By joining the rest of the CSA in banning DSCs, the OSC said, “investors will no longer be subject to the ‘lock-in’ effect associated with the DSC option and the potential for mis-selling will be reduced.”

The regulator also noted that recent industry innovation should help address one of the central objections to an outright DSC ban — the loss of access to investment products and services for lower net worth investors.